Rates Fall in Choppy Session

Treasurys rally in yet another volatile session. Rates pulled back across the curve, falling 4-9 bps across a flattening curve, only a day after they rose 10+ bps. The 10-year Treasury yield closed back below 3%, though only just at 2.97%. U.S. equities climbed across the board, the Nasdaq and S&P 500 climbing 0.94% and 0.95% respectively.

Treasury Secretary Janet Yellen says US inflation has reached “unacceptable levels.” Last week, Yellen admitted her belief that inflation would be transitory was “wrong” and provided an updated economic outlook during her Senate testimony today. She believes “Putin’s war in Ukraine is having impacts on energy and food prices globally,” but sees the bulk of inflation driven by “huge supply chain issues due to the pandemic and shifts in the pattern of consumption away from services and towards goods.” Despite the inflation risks, Yellen believes American Rescue Plan stimulus package passed last year was necessary and addressed economic issues “better than anyone could have anticipated.” Yellen is scheduled to testify before the House Ways and Means Committee tomorrow.

Day ahead. Tomorrow will be relatively quiet from a data perspective as the week continues to build to Friday’s CPI print. Wholesale inventories for the month of April will be released, along with crude inventory changes. The Treasury will auction off a new issue of 10-year notes. The calendar will be devoid of any Fed speakers as the FOMC is in its quiet period ahead of next week’s meeting.